The Top 10 FLSA-Related Mistakes

David R. GolderHartford Office

golderd@jacksonlewis.com

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Why So Many Claims?• DOL’s Wage & Hour Division estimates that 72%

of all employers violate the FLSA in some manner;

• Wage & Hour collective actions exceed the total actions filed under all federal employment laws combined;

• Employers more frequently facing collective or class actions under federal/state wage and hour laws: Class-wide claims for 2-3 years of unpaid wages or

overtime, plus Liquidated damages, state law penalties, attorneys’ fees

and costs2

Claims Increasing• More Plaintiffs’ lawyers jumping on

bandwagon– Easier to get conditional class certification;– DOL leadership makes environment plaintiff-

friendly;– Anti-exemption interpretations:

• Ex.: March 2010 interpretation that mortgage loan officers are not exempt (reversal);

– Plaintiffs’ attorneys get fees paid.

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Top 10 Mistakes and How to Avoid Them

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1. Misclassification As Exempt

• Classification is clear at the top of scale-department managers;

• Classification is clear at the other end of scale:– Ex.: Production workers;

• Gray areas in between.

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2. Allowing Unpaid Work“Suffer” or permit work

• Nonexempt- Employees cannot work late or through

lunch without pay• Automatic deductions• Improper deductions for breaks

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3. Miscalculating Travel Time• Home-to-work and work-to-home = commuting time.• Connecticut Law: When required to report to location

other than the usual place of employment, time spent above normal commute is paid working time.

• Travel time in a company vehicle can be compensable working time.

• Travel time during the working day is compensable, e.g., driving between patients, customers or sites.

• Overnight Travel: During normal working hours is compensable (even on weekends, holidays). Outside employee's normal working hours on a public conveyance is ordinarily not compensable.

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4. Not Paying for

“DONNING AND DOFFING”• (Preliminary and Post-Work Tasks)• Preparatory activities are generally

not compensable unless integral and indispensable part of an employee’s principal duties or required by the employer, CBA, industry, or laws.

• Consider what activities:• are performed before work time starts;• are performed at home before traveling to

work.8

“Off-the-Clock” Work• Non-exempt workers and

technology:• Blackberry, cell phones and laptops:

• Do you need a time-keeping policy to capture such work for purposes of calculating pay and overtime?

• In a lawsuit, use of same technology to defeat claims

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5. Failure to Include Extra Pay in Overtime

• What is the “regular rate”?• Must include extra compensation, such as• nondiscretionary bonuses• lodging• commissions• retention pay• shift differential

• Reimbursements NOT INCLUDED

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6. Misclassifying Employees as Independent Contractors

• 2009 Government report that misclassification is significant problem (reduces tax revenue);

• DOL interested in this issue –made it top priority;

• 2011 budget contained additional $25 million for “misclassification initiative”;

• CT law: $300 civil penalty now is assessed each day of violation (i.e. $300 per day per contractor);

• IRS also to conduct intensive random audits including this issue.

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Connecticut Law Requirements for Independent Contractors• The worker must be generally free from

direction and control in the performance of the services for which he/she is engaged.

• The worker's services must be performed either:(a) outside the usual course of the employer's business; or (b) outside all of the employer's places of business

• The worker must be customarily engaged in an independently established trade, occupation, profession or business of the same nature as the service being provided (in other words, self employed).

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Factors Considered for Independent Contractor

• No one test resolves the issue:1) Extent to which worker is integral part of

employer’s business?;2) Permanency of relationship – how long has worker

worked for same company?;3) Amount of worker’s investment in facilities and

equipment;4) Company’s control over the worker’s hours and

how work is performed;5) Worker’s opportunities for profit and loss;6) Worker’s level of skill, judgment and initiative in

open market competition.

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7. Docking Exempt Employees• Paid by salary at least $455 per week ($475 for

CT)(except computer -- $27.63 per hour; teachers; and certain other exceptions);

• Exceptions – may deduct for:1) Absence from work one or more full days for personal reason

other than sickness or disability;2) Absence of one or more full days for sickness or disability if

there is bona fide plan or policy to compensate for salary lost due to illness or disability;

3) Penalty for infraction of safety rule of major significance;4) Unpaid disciplinary suspensions of one or more days of

violation of written workplace conduct rules;5) First and last weeks of employment; 6) Weeks in which employee is on unpaid FMLA.7) Offset pay received for jury, witness, or military duty

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Consequences of Incorrect Deduction

• An actual practice of making improper deductions from salary will result in loss of the exemption:

During the time period in which the improper deductions were made

For employees in the same job classification working for the same managers responsible for the actual improper deductions

• Isolated or inadvertent improper deductions, however, will not result in the loss of exempt status if the employer reimburses the employee

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8. Making Arrangementswith Employees

• Employees cannot volunteer to do free work

• Employees cannot volunteer to take compensatory time in a different work week

• Employees cannot waive right to overtime pay or other FLSA rights

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9. Ignoring Bad News in Your Industry

Pay attention to:1)Publicized FLSA settlements2)FLSA Lawsuits/Certifications3)News of DOL investigations

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10. Failing to Make Changes• Need to audit periodically• Jobs evolve• Mergers• Legal requirements change

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Best Practices• Keep tabs on exemption status to

assure proper classification:• Avoid the trap that salaried is exempt• Know the exemption claimed for each

job. Be able to back it up.• Is the administrative exemption

being abused?• Do job descriptions help or hurt?

• Are they accurate and up to date?• Can you explain what they mean?• Key is what employees actually do – look

beyond descriptions

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To Do List• Safe Harbor Policy for improper deductions• Examine timekeeping systems• Self-Audit

last review of exempt status? regular rate of pay (bonuses, other payments) time-keeping (rounding) mandatory breaks (state law compliance)

Supervisory Training Evaluation forms – support exemptions?

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THANK YOU

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